Hauber Corporation would like to use target costing for a new product it is considering introducing. At a selling price of $26 per unit, management projects sales of 60,000 units. The new product would require an investment of $300,000. The desired return on investment is 20%.
-The target cost per unit is closest to:
A) $26.00
B) $31.20
C) $30.00
D) $25.00

Question

Quizplus · Accepted Answer

The target cost per unit is calculated by subtracting the desired return on investment per unit from the selling price. Desired ROI per unit = (20% of $300,000) / 60,000 units = $1. The target cost per unit = $26 - $1 = $25.

Hauber Corporation Would Like to Use Target Costing for a New